Latin American labour market policies must be reoriented to address output gaps – UN report

Countries in the Latin America region should carry out a strategic reorientation of their labour market policies in order to increase productivity and address rising unemployment resulting from an economic slowdown, a new report by the United Nations International Labour Organization (ILO) has urged today.

The report, What works: Active labour market policies in Latin America and the Caribbean warns that the achievements made in the region since the 2000s, in terms of social inclusion and work quality, have stalled and are even beginning to reverse, which can lead to a dangerous “structural stagnation” in labour markets that could, in turn, generate an increase in inequality and informality and erosion in the middle class.

“The alarm bells are ringing, the economic slowdown will impact the region’s labour markets in 2016 and over the next years,” said José Manuel Salazar, the ILO’s Regional Director for Latin America and the Caribbean.

“Now what we are talking about are effective solutions. The so-called active labour market policies represent a policy shift that seeks to improve and update the skills of the labour force, readjust labour supply and demand, and promote productive employment. This integrated approach is what labour markets in the region need,” he added.

According to the report, which was developed by the ILO’s Research Department in Geneva, despite some years of solid growth in which social progress and unemployment advanced, those achievements were not consolidated, thus revealing structural deficiencies.

To tackle unemployment, informality and low productivity growth, a policy reorientation is needed in Latin America and the Caribbean

Specifically, the report warns that “even with remarkable progress, the shift to a knowledge driven economy and one based on better quality jobs has not been completed.”

Based on a summary and analysis of labour market policies over the past two decades, the analysis concludes that many countries in Latin America do not have an integrated system of active labour market policies, even if evidence resulting from the implemented programmes in the region show that these policies have positive impacts.

Active labour market policies are interventions that help people find sustainable jobs, directly or indirectly promoting the creation of productive jobs, improving qualifications and productivity of people, and guaranteeing links between those looking for jobs and employers.

The report highlights that the available evidence suggests training programmes, employment subsidies and programmes to support self-employment and micro-entrepreneurship have shown positive results in the region, but that only in few a countries – such as Argentina, Brazil and Chile – is the level of investment in active labour market policies comparable with the levels registered in high-income countries.

In other countries of Latin America and the Caribbean, there are either no such policies or spending levels are very low, according to the report, which highlights the need to improve the active labour market policies in the region so that countries can take full advantage of their positive effects.

Construction workers on the Panama Canal expansion project. Photo: World Bank/Gerardo Pesantez

The report also proposes a series of improvements in the design and implementation of active labour market policies, such as creating incentives to increase the number of beneficiaries, adapting the policies to the specific context, and making sure that programmes benefit all of the target population.

“Even if these policies have great potential, we need to highlight that the design, targeting and implementation are essential to guarantee their effectiveness,” said ILO specialist Veronica Escudero, one of the authors of the report.

In this sense, it is necessary to “be very clear about the employment barriers that people in a country face, as well as the needs of the local labour market, to ensure the relevance of the policies and to maximize their impact, including the number of beneficiaries,” she explained.

The report includes analyses of data from the entire region, with an emphasis on Argentina, Colombia and Peru, in order to understand the needs and challenges of the generation and implementation of these policies.